Commentary: Improvement in labor market is painfully middling

What’s important is not the month-to-month change, but the trends. In any given month, the change in employment across the nation is barely discernible in the data. Over the past year, for instance, employment has risen by an average of 157,000 per month in a country with 134 million jobs. That’s an increase of about 0.1% a month.

The unemployment rate fell to 7.7% in November, the lowest in nearly four years.

It’s especially prudent to take Friday’s report from the Bureau of Labor Statistics on November’s employment situation with a grain of salt.

The government reported that 146,000 nonfarm payroll jobs were created, according to a survey of nearly 500,000 workplaces. Meanwhile, the unemployment rate fell sharply to 7.7%, based on a separate survey of 60,000 homes. Read U.S. creates 146,000 jobs in November.

The government said Hurricane Sandy appeared to have little impact on hiring or hours worked, a conclusion that’s hard to have 100% faith in. The storm slammed into the most populous region in the United States, devastating many towns and cities in New Jersey, New York and Connecticut.

Past storms have had a noticeable, if temporary, impact on employment, and it’s likely that Sandy was no different. We’ll probably get a better idea of the regional impact when the government releases the state and local breakdown of employment and unemployment on Dec. 21.

The impact of Sandy might be more apparent in the household survey than in the business establishment survey. The household survey was conducted one week earlier than the workplace survey, just a week after the storm hit, and it showed a 122,000 drop in employment and a 351,000 decline in the size of the labor force.

The drop in the unemployment rate to 7.7% was due to the decline in the labor force, not to any improvement in the labor market. That’s not good.

If we take a step back and look at the longer trends, we see a labor market that is getting better, at a agonizingly slow pace.

Over the past six months, for instance, employment in the household survey has increased by an average of 163,000 per month. Unemployment has declined by an average of 115,000 per month.

The improvement in the unemployment rate from 8.2% in May to 7.7% in November was accompanied by a 47,000 average monthly increase in the labor force.

That may seem like very slow growth, but the total population of those 16 to 65 grew by just 42,000 per month. Employment is growing just enough to absorb new entrants into the working-age population and to make slow progress in reducing our unemployment problem.

Unfortunately, at this rate, it’ll take years to find jobs for everyone who wants one. Jobs are still our biggest challenge.

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